How Betamax Might Save the Dotcom

Yes, the best “almost there” technology of the 70s and 80s is back to save the day – or ruin it depending on your outlook! The Dotcom in this case isn’t just a website – it’s also person, Kim Dotcom. Until a few months ago, Kim ran one of the most popular websites on the internet, a file locker called Megaupload.com. For those not familiar with the technology, a “file locker” is a site where a user can upload files and then access them later via a download link. The download link might be kept for personal use (requiring a log-in) or it might be made public and spread across the web.

So, you may be asking – this sounds a lot like GoogleDrive or CloudDrive or DropBox, why is Megaupload special? What set Megaupload apart from those other services is how it was used – and how it went about it’s business. The new cloud-based/online backup solutions are designed primarily for uploading and archiving private files. Almost all download links require registration and log-in and the number of downloads is limited (either per file or per time period or both). They are designed for one person or a small group to store their files and have personal access to them any time from any place. Megaupload, on the other hand, not only permitted public download links and large numbers of downloads, but actually actively encouraged it by paying users who shared popular files (say $15-25 per 1,000 downloads). Kim then profited by selling advertising space on these download sites.

The combination of anonymous downloading, nearly unlimited number of downloads and encouragement to upload popular files lead to a particular sort of use for the site – illegal sharing of copyrighted works, such as music, movies and software. At the time of its shutdown, Megaupload was storing more than 25 MILLION GIGABYTES of user data – according to the US government, mostly illegal copies. This data has since been seized by the government; along with most of Kim Dotcom’s assets (he allegedly made more than $175 million from the site over the last 7 years). Kim and other top Megaupload employees were charged in January with racketeering and aiding and abetting criminal copyright infringement.

Now the question becomes can the government prove its case against Kim. And this is where Betamax might just come in and ride to the rescue. Not the actual Betamax video tape format of course (for those that don’t know what Betamax is, see here), but the Supreme Court’s Betamax decision – otherwise known as Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984). In this landmark case, Universal City Studios sought to ban the production and sale of Betamax home video recorders (and the similar VHS technology) on the grounds that, once in the hands of the public, these machines could be used to record live programming and play it back later (called “time shifting”) or to make pirated copies of the programming in violation of copyright law. In a 5-4 decision, the Court decided that the practice of “time shifting” constituted a fair use exception under copyright law and (more importantly for Kim and Megaupload) that the technology and products themselves were not at fault merely because some users might put them to illegal use. Because the Betamax recorders had substantial non-infringing uses (possible uses, not necessarily what most people would use them for), the producers of the recorders could not be held liable for any misuse by the public.

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This precedent has led to the creation of entire lines of technology. Imagine if the decision had been the opposite – we would not only lack Betamax and VHS VCRs, but also CD-RW and DVD-RW drives (for computers and television), audio cassette recorders, MP3/digital voice recorders, DVRs and so on. Technology many of us use every day, in multiple forms. Creation of new content would be stifled if the ability to create distributable media were tightly controlled in this fashion.

How does this apply to Megaupload then? Well, Kim and his attorneys have made it clear that they intend to argue that Megaupload had a large number of users who were legitimately sharing their own content – or even using it for personal backups. And because the technology has substantial non-infringing uses (just as do GoogleDrive and others in the space), Megaupload as a company cannot be held liable for the misuse of certain users. And as to their business practice of paying for popular uploads and encouraging sharing? Well, didn’t Sony market its Betamax players as capable of recording (copyrighted) television broadcasts and copying tapes? Maybe it doesn’t seem all that different, really…

The government will undoubtedly argue that Sony did not pay Betamax users for making popular recordings (though they did profit from each blank tape sold) and that Megaupload (unlike Sony) was in a position to see what the users were uploading because they hosted the files and saw the traffic numbers. But where is the line drawn? The current new batch of document dropboxes and drives could ostensibly be used for file sharing also (albeit on a more limited basis, given their models). And YouTube regularly has videos posted and then removed that violate copyright restrictions. Where did Megaupload cross the line into “criminally bad”? It should be noted that Megaupload did (largely) comply with the Digital Millennium Copyright Act, which requires that, upon finding copyrighted material posted for sharing illegally, the copyright holder must give notice to the server host who must then remove the content. Megaupload complied with this law in the same fashion as YouTube – removing content upon receipt of a notice – so how did they run afoul of the law? Criminal law, remember, needs to be clear and set a definable standard of behavior – just because something “smells fishy” doesn’t mean it is illegal.

This may yet end up being a landmark case for copyright law – and for technology as a whole – that changes how business is done online forever. Stay tuned for further updates – and in the meantime, comment on what you think should happen below!

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